Berbice Bauxite Strike

Nov 25, 2009 Editorial

Workers at the Bauxite Company of Guyana Incorporated (BCGI), the company that mines our bauxite in Berbice, are out on strike. As with the sugar workers that struck against their corporation, GuySuCo, the issue is a wage demand by their union that the company claims they just cannot afford. While there is now a further dispute between the union and the employer as to what exactly was on the table, the employer responded to the union’s demanded for a 10% wage increase by insisting that this could only be accomplished by reducing the workforce by 75 workers.
Almost fours years ago when Rusal, one of Russia’s three biggest aluminium producers (and today, the world’s largest) and Guyana inked the deal to privatise the Berbice bauxite operations, the price of the metal had skyrocketed to record levels. The government was to retain a 10% share of BCGI which was supposed to produce and ship some 2 million tons of bauxite annually for the next 10 years. Then, of course, came the global financial meltdown – which lead to a global depression and a concomitant plunge in the demand for primary products and their prices. The owners of both the Berbice mines and the Linden ones (Bosai – Chinese) scaled back their production and their manpower requirements since last year.
The union has made it clear that they do not accept the claims by the company that it is doing as badly as it states. We are not sure of the financial status of the local operation, but as we wrote a year ago (“Rusal and Berbice Bauxite) , the parent company is on life support from a consortium of foreign bankers as well as the Russian government (which had to extend an emergency loan of US$4.5 billion last year). Since that time because of the shenanigans of Rusal’s owner Deripaska (reputedly the richest man in Russia – who took out US$4.7 billion from the company last year – more than half of the company’s revenue) and the continued low demand for aluminium, the company’s fortunes have remained precarious.
Two months ago a Republic of Guinea tribunal ruled that Rusal unlawfully acquired its shareholding control of its Friguia alumina refinery in the country in 2006, and should make restitution – which could be in the range of over half a billion dollars. Then again, some allege that the new President of Guinea – via a coup – might just strike a deal with Deripaska. The judgement came just before the federal court in Nigeria will rule on a parallel case, challenging Rusal’s takeover of the Aluminium Smelter Company of Nigeria (Alscon) in the same year – 2006. But before the Nigerian court decides, a report from the National Committee on Privatisation has already gone to Nigeria’s President Umaru Yar’ Adua, concluding that violations of the privatisation rules and subsequent investment conditions for Alscon should lead to the revocation of Rusal’s concession in that country.
Then there are claims against Rusal for transfer pricing and tax avoidance are possible at any point along this chain. They have been discussed from time to time by the Russian parliament, and the Russian Accounting Chamber, because of Rusal’s use of tolling contracts. These provide for highly complex schemes of input and output price calculation, while preserving offshore ownership of the traded mineral and metal. This will certainly lead to more pressures on Rusal’s bottom line.
The point we wish to make in this editorial is that BCGI is on the tail end of a long supply chain for both bauxite and funds for a company whose parent has earned a poor reputation for financial probity. The Government, through its 10% share in the local outfit should have had access to the records that should be able to clarify claims made by the union the union that the company is not exactly down and out – their protestations to the contrary.
Either this or the matter should be sent to compulsory arbitration. We hope that in such an eventuality, the arbitrator is competent to pierce the corporate veil of both the local company and its parent so that we, as well as the union, could know what is going on with our bauxite.

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